Netflix Initiates Talks for Big European Expansion

Netflix’s next big move is to take over Europe. Sources close to the company’s plans told The Wall Street Journal that the streaming service has initiated discussions about bringing content to France and Germany, among other countries. The largest hurdle right now is working out licensing rights to popular content, sources say. Netflix is currently available in North America, the U.K. and some of Northern Europe. The Wall Street Journal’s report says Netflix could launch in France and possibly Germany before the end of 2014.

As recently as last week, Netflix CEO Reed Hastings officially set his sights on European expansion, saying the company is focused on bringing its service to more countries. As of now, Netflix is available in 41 countries around the globe—many of which are in Latin America—including Norway, Denmark, and the Netherlands. France and Germany would be two big borders to cross; Germany already has its own Netflix-like service, Snap, provided by German satellite operator Sky Deutschland AG. France, meanwhile, offers CanalPlay, which has more than 300,000 subscribers, the Wall Street Journal said.

The U.S. has always been strong for Netflix, and the platform has only grown thanks to its expansion into original content and a continuously improving library. But with a market of just 88 million broadband homes throughout the United States, Europe offers a much bigger opportunity with 134 million broadband-equipped homes, according to SNL Kagan research. The market in Europe is relatively untapped, and streaming-video is expected to become incredibly popular across Western Europe in 2014 the research company said.

While Netflix has found it challenging enough expanding its services across the globe, actually turning that expansion into revenue poses its own problems. In Latin America, for example, the company has found it difficult converting free-trial users into paying subscribers—it certainly took its toll in 2013 when Netflix posted a loss of $274 abroad. Still, Netflix’s losses are narrowing, and subscriptions are on the rise.

Netflix’s biggest hurdle right now will be securing the proper European content rights. Many popular alternatives across Europe, such as France’s CanalPlus, has exclusive in-country rights for two years to the upcoming season of House of Cards, for example. Other European companies own exclusive rights to many popular U.S. shows, such as Germany’s Snap, which has online rights to the first season of Game of Thrones.

Working out deals to come to these countries, and then offering the right content, will be a challenge. But given that Netflix is willing to embark on a “substantial European expansion,” according to Hastings, it sounds as though the service is ready to meet the competition head on.